Revitalizing the economy

Giant retailer credited with growth

Ottawa  To some, this Kansas city just 30 minutes south of Lawrence would be considered prime stomping grounds for the "Evil Giant" that many Lawrence residents seek to slay.

That would be Wal-Mart. Likely no Kansas community is more linked to the world's largest retailer than Ottawa. The town of about 12,000 has a Supercenter, of course, but what ratchets up Wal-Mart's presence here is a massive distribution center on the outskirts of town that employs 1,500 people.

Here, Wal-Mart certainly is a giant. Its distribution center is the largest employer in town, and its store is the second-largest employer in town at the moment. But the adjectives used to describe the company are different in Ottawa. The world's most scrutinized retailer is more likely to be called benevolent than bad, excellent instead of evil.

"It was a tremendous turning point for this community," said Tom Weigand, president and CEO of the Ottawa Area Chamber of Commerce, about Wal-Mart's decision 10 years ago to locate in Ottawa. "At the time, we're having a hard time raising $80,000 for our United Way campaign. When Wal-Mart came to town, it raised $100,000 on its own.

"When they came to town, that is when we started building houses again. We build 120 to 150 houses a year in the county. Before, we weren't building but five or 10 a year."

Now, Ottawa may be at another turning point. When taxpayers receive their property tax statements this month, they'll see that the city's total property tax rate has decreased by nearly 17 mills or 10 percent from a year ago.

The majority of the decrease is courtesy of Wal-Mart. That's because the 10-year tax abatement the company received to locate in Ottawa expired this year. Wal-Mart is now paying nearly $800,000 a year in property taxes that it previously wasn't paying.

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The county used its share of the property taxes to reduce its mill levy by 9 mills. It all has added up to a community that doesn't necessarily universally love Wal-Mart but certainly has a much different view of the company than people in Lawrence.

"I think for the most part, the community has embraced Wal-Mart," said Richard Jackson, a longtime member of the Ottawa City Council. "You certainly have some people who aren't happy with Wal-Mart because they think they run small businesses out of business. But you are going to have some of that in any community. I think it is fair to say we have a lot less of that feeling here than in other places."

Aggressive approach

Whether Ottawa's experience with Wal-Mart suggests its Lawrence opponents have misjudged the company, though, is debatable. After all, the controversy in Lawrence is about whether the company should be allowed to open a second store, not a distribution center. Plus, several opponents have said they're not opposed to Wal-Mart but rather the traffic a large store creates.

Many Lawrence residents also won't be too eager to trade property tax rates with Ottawa. Even after the reduction, Ottawa still has a total property tax rate - the mill levies of the city, county and school district combined - of about 153 mills. Lawrence's is about 115 mills, although it did go up by about 4 mills this year.

How Ottawa attracted Wal-Mart, however, does produce an interesting look into the community's economic development strategy. Ottawa and Franklin County landed Wal-Mart by being aggressive. The county offered Wal-Mart a 100-percent tax abatement for 10 years. The city, even though the site was about three miles outside the city limits, financed a $1 million extension of a city water line to the site to help seal the deal.

Lawrence has never offered a company a 100-percent tax abatement, and allowing a major industrial site miles outside the city limits is generally prohibited in city planning documents.

"The key is that we're open and willing to look at all alternatives," Weigand said. "We don't try to limit who we will look at. We look at them and then decide if we want to go after them.

Richard Jackson, Ottawa City Council member, on the future of his community

"I don't want to get into analyzing Lawrence, but they get into debates about whether they want a distribution center and whether it pays enough. We don't do that. We believe there is a job for everyone. Not everyone is going to make $60,000 a year. You need different jobs."

Weigand said the wage issues usually ended up working themselves out anyway. He said starting wages at the Wal-Mart distribution center are now more than $13 an hour for most workers. He said wages started lower than that, but the company realized it had to increase them to attract the necessary number of employees.

Some observers of the Lawrence economy, though, cautioned that Ottawa's strategy may not be a good one for Lawrence. Allen Ford, a Kansas University business professor and critic of tax abatements, said communities would be better off if they offered fewer tax abatements.

"My concern has always been that it is just going to become the norm for a company to get an abatement," Ford said. "The problem with that is it is not special anymore, and if you want to get something special, you have to go up another rung on the incentives ladder.

"You end up converting everyone to a subsidy-seeker, and that is not good for the long term."

Flying high

There aren't any regrets on the part of Ottawa leaders, though. The 100-percent tax abatement to Wal-Mart was not the last it offered. Since then, the city has offered two 100-percent abatements to American Eagle for its distribution center.

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That's the same American Eagle that originally planned to build a distribution center in Lawrence in 2000. It backed away from its Lawrence plans after the community became engaged in a lengthy battle about whether the company would pay wages worthy of a tax abatement. It ultimately went to Ottawa, into a vacant building that had been home to a hardware distribution center.

Since then, the company has undertaken a $40 million expansion and is now completing a $60 million expansion. When the second expansion is completed, it will create another 300 jobs, which will be in addition to the approximately 250 the center has today. As with Wal-Mart, Weigand said the wage issue had taken care of itself. Wages now are in the $10.50- to $11-per-hour range, plus benefits, after the company realized that was what they had to offer to attract employees.

Jackson, the city councilman, said he could understand how it might be difficult for some communities to justify offering such large tax abatements. But he said community leaders in Ottawa didn't spend much time playing the "what-if game" by worrying about whether a company simply would leave the community once its tax abatement expired.

"There can be a downside to anything you do, but sometimes you can dwell too much on the negative aspects and on the what-ifs," Jackson said. "You are not always going to win every one, but you have to take a positive approach. I think that is a big part of why we're growing."

Now that the city has more jobs and the county's population has increased by about 1,500 people - or 6 percent - since 2000, Ottawa is beginning to attract more commercial businesses.

Several of them are locating in the downtown area, which Weigand admitted had become "pretty old and stale" in the 1980s when Ottawa was losing population.

The downtown has attracted interest from Lawrence businesses. El Mezcal, a Lawrence-based Mexican restaurant, opened in downtown Ottawa more than a year ago. Henry T's, a longtime Lawrence sports bar, opened a location in downtown Ottawa last month.

"I just looked and saw all the growth coming south out of Kansas City," said David Heinz, an owner of Henry T's, who said the expansion of U.S. Highway 59 to four lanes would spur more growth. "You can just see a lot of potential when you look at this town."

Most Ottawa residents are glad to see the growth. But Lisa Schoonover said she did run into some people who thought the changes had been negative and threatened the community's small-town feel. She said other people also had expressed skepticism about whether the lower tax rates would continue.

Several Ottawa leaders said the growth of commercial businesses had been the other major factor in Ottawa's ability to reduce its property tax rate. This spring, voters by an approximately 70 percent margin approved a half-cent sales tax. It was designed, in part, to reduce the city's property tax rate. The city is using the sales tax to reduce the mill levy by 6 mills in 2006 and is expected to reduce it another 2 mills in 2007 and 2 more mills in 2008, said Scott Bird, Ottawa city clerk.

That's an idea that at least one Lawrence leader wants to consider. Mayor Mike Amyx proposed a 1-cent city sales tax earlier this year to pay for infrastructure and reduce property taxes. The idea, however, failed to win support from city commissioners. Amyx said he hoped Lawrence residents would take a look at how such a system was working in Ottawa.

"I would like to see another round of discussion about it here," Amyx said. "I'm the first one to say that our community can't solely rely on sales taxes, but I'd like to discuss the issue some more."

More like this story on LJWorld.com

Comments

And to think they did this all WITHOUT a "smart" Bozo Business Czar and WITHOUT "smart" Progressive City Kommission. Well at least the legal fees with WalMart will spur Lawrence's economy. Oh, I forgot. Even those will be going to a Johnson County Law firm.

I'm not saying anything bad about Wal-Mart, but allowing tax abatements to expire without a plan to keep from having to shell out that money isn't what made them what they are today. Maybe they'll pay it for a few years, but to be sure, they have a plan to keep from having to pay into the future. Not that I'm suggesting that they are trying to weasel out of commitments, but maybe making new ones. Couldn't they always threaten to move operation to another city/county where they could get another tax abatement to build another facility elsewhere (you know, like pro sport teams do). Then sell their existing center in Ottawa to a different company who would maybe be hesitant to commit unless the city/county sweetened the deal with an abatement for them too? And the city/county wouldn't have a choice because otherwise the facilities stay vacant? Is this too simplistic of a view of the business practices of companies like the Wal-Mart? Aren't they in the business of maximizing profits like all good capitalists? That's what makes your stock portfolios and mutual funds grow, right?

These numbers seem odd to me. The difference in median household income is only $11,000, while houses in Lawrence appear to be more than twice the price of those in Ottawa. Maybe that's why your damn property tax bills are high, not because of some perceived commie commission. Doesn't this show that the tax rate is actually lower in Lawrence? 115 is still smaller than 153, right? Maybe I don't get it. The tax bills seem to be less than double even thought the property values are more than double.

you mean growth DOES PAY? but that isn't what my professor says. it is happening everywhere, but lawrence? well, that is counter to what my professor says. my professor is very smart. no, he has always taught. he would rather teach than work in the REAL world, though he used to work for the government. yes, he fully supports our progressive city commission. yes, he hates corporate imperialist america too! isn't he great? no, he's a _____ (fill in the blank) professor.

"Even after the reduction, Ottawa still has a total property tax rate - the mill levies of the city, county and school district combined - of about 153 mills. Lawrence's is about 115 mills, although it did go up by about 4 mills this year."

That pretty much says it all. If you want those jobs in this town, we all pick up the tab, because they were given a free pass.

"I would like to see another round of discussion about it here," Amyx said. "I'm the first one to say that our community can't solely rely on sales taxes, but I'd like to discuss the issue some more."

Raising one regressive tax to give relief on another regressive tax accomplishes nothing.

The state income tax, especially on higher tax brackets and corporations, should be raised substantially so that both sales and property taxes can be lowered.

If the other Wal-Mart closed its' doors tomorrow Lawrence would not die or go broke. It would open new doors to more choices and reasonable competition.

Our tax bills are high because of tons of new housing that does not generate enough tax revenue to maintain the the cost of community services. I do not see that happening to Ottawa. I do see it happening to Eudora because of its' close proximity to Lawrence.

The Wal-Mart warehouse should not be included in this discussion for it does not affect retail markets. Ottawa and Lawrence very different towns like apples and bacon. Does downtown Ottawa have vacancies...you bet.

Personally, I don't think Lawrence is large enough for, or needs, TWO Walmarts, no matter where they are located, or how well they are designed.

However, I do agree with Mayor Amyx about his sales tax idea. The city depends WAY too much on property tax for revenue. It's getting worse every year. A sales tax increase is paid by EVERYONE, not just property owners, so the tax burden is spread out a bit more.

Last time I checked property taxes were based on the value of your home/property...also special assessments are placed on your property tax depending on street/sewer improvement in newer housing areas...

You can't just base it on average...you have to look at the total tax bill and what the county appraiser has valued your property based on like properties.

I know math is difficult for you, Pil, but property taxes on a $100,000 house in Ottawa will cost you $1759, while property taxes on a $100,000 house in Lawrence will cost you $1322. Which means that if you have $100,000 house in Ottawa, you're paying more than $400 a year to cover all of those abatements.

In your game of "let's pretend," you assume that supporting Wal-Mart's warehouse costs the city, county and school district absolutely nothing.

And even though there was a drop in the mill levy with the end of Wal-Mart's abatement, the reason Ottawa's property taxes are so much higher than Lawrence's is they will be paying off the expenses that serving Wal-Mart cost during those ten years for many years to come.

And dollars to donuts says that Wal-Mart will be back for another (100%?) abatement handout within the next few years, with the not-so-veiled threat that they will be gone if they don't get it.

A spokesperson for the chamber of commerce is hardly am objective source for reporting on the topic of economic benefits of a wal mart. He presents no evidence to show that wal mart was the source of the any of the events he describes. Contributions to united way hardly is an economic indicator. In the time frame discussed, growth was fairly typical in US communities. Ottawa was hit hard by reaganomics/voodoo economics of the 12 years of reagan/bush sr. and recovered under clinton. To credit wal mart is disingenous; just as running this article on the front page instead of on the editorial page where it belongs shows the poor judgment of the editorial staff of this sorry newspaper that has a monopoly on our city.

Let's do some math. (Don't panic, Pil. I'm just kidding. I'll do the math for you.)

The property taxes on the average house in Ottawa ($77544) are $1364. Those taxes on a $77544 house in Lawrence are $1025. Which means the average taxpayer in Ottawa paid $338.57 more than they would in Lawrence.

So with 12,597 residents, and assuming 4 persons per household, there would be about 3150 households in Ottawa. Mulitply 3150 times $338.57 and you see that it costs Ottawa taxpayers a bit over a $million a year in taxes over what comparable Lawrence residents pay.

The sad part is Ottawa's residents were paying considerably more than that before Wal-Mart started paying taxes.

This article gives me very little respect for the journalstic integrity of the Journal World. It seems that recently this puplication has become very slanted in its coverage of the current Wal-Mart debate. The fact that the Wal-Mart issue is such a hot topic in this town would make you think that the local paper would try to show some objectivity towards the subject. However in the last few months it has become apparent that this is definitely not the case.
This article seems less like reporting and more like a commercial for putting a new Wal-Mart in town. There also seems to have been a few stories recently in the paper about how Wal-Mart is offering cheaper perscription drugs. Once again, this seems like unpaid advertising instead of an actual story. I've heard rumors that the owners of the Journal World might own or might have previously owned the land that Wal-Mart is trying to put up a shop in. If this is true, and the owners have some financial stake in the outcome I think it should be made public. I would like a response from the Journal World staff as to the validity of these rumors. (do they have any basis in fact?) ----> continued

None of the stories dealing with the Wal-Mart debate have been blatently slanted, but I do feel as though misinformation has been spread in the past. Back in April, either due to poor reporting or deliberate omission of the facts, a headline read "Wal-Mart lawsuit over, will be allowed to build". This caused many Lawrencians who opposed a new Wal-Mart to think there was no hope and give up on any kind of protests they might have. Only months later did we get the whole story that the lawsuit had only been put on hold and the issue was still up for public debate.
Other forms of journalistic subjectivity have come in recent online polls that have asked very leading questions of whether or not a person wants the new Wal-Mart to go in. For example, the last one I remember reading had a yes answer of "Yes, I think we've wasted too much tax money on this issue already". If this isn't a slanted question I don't know what is.
This poll also highlights how the Journal World's coverage of the debate seems to be focused on how the issue has involved the town in a lawsuit, and just what the lawsuit is costing us. There is very little coverage as to why anyone might question the ethics of Wal-Mart's business practices, or how bringing in a new store might bring down property values, or raise crime rates.
This last article seems the most subjective of the recent stories, and also seems to come out of left field. Why did the reporter choose to compare Lawrence with Ottawa and not some other town? Other than being in Kansas, what does Ottawa have in common with Lawrence. If the reporter was looking to be more objective, he might try to comppare how Wal-Mart has affected a town closer to Lawrence's size or at least to another college town. Not only does the article seemingly give Wal-Mart the entire credit for revitalizing Ottawa's economy (a bit of a stretch), but it doesn't step back and look at how Wal-Mart has hurt the economies of other towns. There have been many studies on the issue that a simple google search can find instantly.
I strongly feel that if the Journal World wants to have any kind of reputation for objectivity, it needs to start covering this issue more honestly. I have been a long time reader, but I strongly feel the coverage of this story has damaged my opinion of the paper's legtimacy. I hope I am wrong about this.

I used the information available from the article to make some educated guesses. You want to assume that the $1 million extra that homeowners in Ottawa pay in property taxes stems from some/any cause other than the more than $1 million a year they give out in abatements, but you provide absolutely no support for that assumption.

Does that mean that you are ready to support your assumption (or is it an educated guess?) that the very sizable abatements given out in Ottawa don't contribute at all to the property taxes there being considerably higher than they are here, Marion?

Exactly why are they so much higher there, Marion? (I'm sure Pilgrim knows if you don't.)

Sure there is a cost to providing services to the Wal-mart distribution center that have had to be picked up by the taxpayers over the last 10 years. The question is if the additional people who have moved to Ottawa have provided enough in taxes to offset those costs. As stated in the article they are now building in excess of 100 houses per year where before they were only building 5.

Now follow the math (I know it's hard for you). That means there are 1000 additional households paying taxes that weren't 10 years ago. Now based on the numbers provided above that means an additional 1,364,000 in taxes each year. But the abatement is only 800,000 per year. Which means the city is now pulling in more than 500,000 additional tax revenue dollars than they would have even if they continued the abatement.

Seems pretty obvious that the cause of their higher taxes must be something other than mean old Wally World now doesn't it? Couldn't be because they are in a less populated county and therefore fewer people to spread the infrastructure costs over now could it? Naw couldn't possibly be that because that would fly in the face of your belief that larger is by definition worse.

The problem with your math is you assume that there are no costs to the city/county/school district(s) for all of that residential development. That's a pretty big assumption given that it's a well-accepted fact that without a really high tax rate, residential development doesn't pay for itself.

Bottomline is still bottomline. Ottawa and Franklin County are more expensive taxwise than Lawrence/Douglas County, with clearly the biggest difference between the two areas being the rather sizable abatements they have given out.

The result of those abatements is that expansion of infrastructure and services to meet the needs of both the new industrial and residential development need to be paid for through higher property and sales taxes.

Is it worth the cost? That's a different question, but it's pretty clear that it has cost the average Ottawa household upwards of $400 per year to fund it, over the last ten years, and likely for some time to come.

Those of you who think Lawrence should be giving similar abatements should at least be honest about what they will cost us. (but since you can't even be honest with yourselves...)